James Miller – VP-Finance, Treasurer and Secretary Bill Sherertz – Chairman, President and CEO

Josh Vogel – Sidoti & Company Ameda Zakari [ph] – Roth Capital

Good afternoon. My name is Vanessa and I will be your conference operator today. At this time, I would like to welcome everyone to the earnings release call for Barrett Business Services. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. I will now like to turn the call over to Mr. James Miller. Please go ahead, sir.

Thank you. Good morning. This is Jim Miller with Bill Sherertz. Today, we will provide you with our comments regarding the company's operating results for the fourth quarter ended December 31 and our outlook for the first quarter of 2010. At the conclusion of our comments, we will respond to your questions. Our remarks during today conference call may include forward-looking statements. These statements along with other information presented that are not historical facts are subject to a number of risks and uncertainties. Actual results may differ materially from those implied by the forward-looking statements. Please refer to our recent earnings release and to our quarterly and annual reports filed with the Securities and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ. Page one of yesterday's earnings release reflecting our operating results for the fourth quarter summarizes the company's revenues and cost of revenues on a net revenue basis as required by Generally Accepted Accounting Principles. Most of our comments today, however, will be based upon gross revenues and various relationships to gross revenues because management believes such information is, one, more informative as to the level of our business activity, two, more useful in managing and analyzing our operations and three, adds more transparency to the trends within our business. Comments related to gross revenues as compared to a net revenue basis of reporting, have no effect on gross margin dollars, SG&A expenses or net income. Turning, now to the fourth quarter results. As reported, the company earned $0.21 per diluted share in the 2009 fourth quarter as compared to similar earnings per share of $0.21 for the fourth quarter of 2008. Total gross revenues for the fourth quarter of $270.8 million increased $7.7 million or 2.9% over the 2008…

Thanks, Jim. Actually, I considered the fourth quarter to be a good quarter, particularly given the challenge economic environment. During that quarter, we signed a total of 113 new customers on the PEO side. Of those 28 were considered white collar. During the quarter, we canceled or had 50 customers leave us. Of that 50, 15 were for AR issues, which is our choice. An additional 15 were non-AR issues or risk issues that we did not care to take any longer. Four businesses sold. The number of businesses left on their own. Three, pricing, was four customers. Two payroll in house was three. So three customers decided to leave using another service. So very positive. We still face a lot of economic headwinds in terms of particularly credit probably being the number-one issue that we see. Starting the year, I'm pleased with what I see, a lot of new customers coming on. The overall trend is up 10% for the first four weeks of January. Preferred payroll is growing. We have nice deals with the PEO and staffing is up. And that's given some headwinds that we have snow in the east as some of you, I'm sure are familiar with. A lot of our branches on the East Coast were kind of small or shut down and then heavy rains in Southern California, which is affecting us as well. So being up 10% given those two factors, I think portrays some very good stuff in the future for us. So that's about all I know right at the moment. I'm pleased with the company, even though it's going to be a loss in the first quarter. That's mostly due to pseudo rates. The more new customers you bring on, which was another really good quarter for bringing on new customers. Actually, all of those customers in the first quarter we probably have very small margins to negative margins. And unless staffing were to pick up significantly first quarter is going to remain to be negative most years to come as well. And with those comments, I'll open it up to questions.

(Operator Instructions) Your first question comes from the line of Josh Vogel from Sidoti & Company. Josh Vogel – Sidoti & Company: Hey, good morning. Thanks for taking my questions.

Yeah. Josh Vogel – Sidoti & Company: Actually, your last comments lead into my first question about the payroll taxes and what not. But I was curious maybe, what your outlook is for the staffing business is right now and as we look out to future years, is PEO going to continue to grow faster than staffing or do you see, staffing maybe a little bit of a coming back and then thereby easing the -- easing the losses we typically see in Q1 in going future years?

Josh, the staffing business is a very competitive world out there and it's much easier for us to grow on the PEO side, which is not to say that we're eliminating the staffing, but it's been pretty difficult '09 for staffing. I mean that's kind of one of the first things that's cut. But as you've seen from Kelly and some of the others staffing in general has picked up and we're seeing it as well. But it's not a main emphasis that we're particularly pushing at this point, because it's a difficult business to really kind of push in the economic environment we're in. I think what you see from others is just organic internal growth of the size of their customers and it is with us. While, we're always signing new customers and older customers are using less just because that's the nature of the business. We see the PEO business certainly as a longer term revenue and that's the attractiveness of PEO business as well as preferred payroll. Those tend to be very long-term and the staffing tends to be a lot shorter term, still a very nice addition to margins profitability. But very subject to economic conditions. Josh Vogel – Sidoti & Company: Okay. And I understand the tax component that hits up early in the year especially when you're bringing on a new PEO business. But what about if we're looking at quarters two through four? When you're adding those PEO clients what's the margins right there if you're adding the similar, I actually missed the number of net -- of client additions you had, was it 113?

Yes. 113. Josh Vogel – Sidoti & Company: Okay. So when you're bringing on a hundred new clients a quarter, when the -- how long does it take until you turn a profit on them?

Approximately three months and it depends on the level of pay. We're tending to sign higher pay clients, which will put us out of the caps earlier, but that's always going on. That the subject that hits in the first quarter is every customer's that we have, not only new ones but every customer gets back in that level. So effectively all of our PEO business in the first quarter, its zero margin to sometimes negative margins. And then second quarter we start to pick up the margins. And then obviously, third and fourth quarter we picked up all those margins in our profit as well. So effectively, you could look at the PEO businesses as we make our money in the last six months. Josh Vogel – Sidoti & Company: Okay. But if everything stays status quo, you -- obviously you are going return to profitability in Q2 similar to what we saw last year and prior years?

I think it will be greater than last year. The economic conditions just based on my own internal models, we should make up what we lose in the first quarter and second quarter if economic conditions remain as they are. Josh Vogel – Sidoti & Company: Right. Okay. Just shifting gears a little bit, I just wanted to get a feel of your client's payrolls. Are they adding or at least holding firm?

Holding firm. We just ran an average hours worked and average number of employees and we're pretty heavily California. It's remained stagnant the last six months. I guess that's good news. It's the old deal that every time when I hit my finger with a hammer it hurts. Well. Quit using a hammer to hit your finger. So when it stops going down, it feels better. That's what we've seen over the last six months.

Over the average worked the last few months, are those metrics that you'll disclose.

I don't know. The only – yeah, we could. Greg runs those. And yeah we could do that.

Okay.

I don't know how inaccurate they are. But it's the same inaccuracies, all the time, so it's a comparative level that we look at not necessarily how accurate they are in terms of actual dollars and numbers.

I got it. But I guess you could give those to me off line. With regards to temp hiring, obviously we see the temp hiring pick up based on the monthly BLS reports here. I was wondering, what percent of your clients use recruiters for the temp hiring versus do that internally?

What percent of our clients are temporary? You mean on the PEO front or just general?

Mostly on the PEO front. I mean, totally on the PEO front I'm just curious if the bulk of your clients actually do the temp hiring internally versus using the recruiters, because you benefit when it's done internally.

Our customers are mostly small businesses and there is crossover between PEO and staffing. I would say we probably hit 90 plus percent of any staffing that they do use. Although, they're not very big users to be frank about it of temporary help.

Right. Okay. I'll jump back into queue. Thanks a lot, Bill.

Thanks, Josh.

Your next question comes from the line of Jeff Martin from Barrett Business Services.

May be Roth. Ameda Zakari – Roth Capital: Hey, Good morning, guys. This is Ameda Zakari [ph]. I'm calling in for Jeff.

Yes Ameda Zakari – Roth Capital: Just curious to see what your clients are telling you in terms of business conditions. I mean, would you guys say the environment is showing signs of improvement.

We kind of polled managers and talked to them, I think what we're hearing is they're hopeful. It would be nice to see Washington make decisions or shut up for awhile and I think people would make more definitive decisions. Credit is still the number-one issue of small business, the able to get loans with bank financing has loosened some but it is still a critical issue for them. Ameda Zakari – Roth Capital: Okay. And can you talk about the recent trends for the fee part of the business versus the direct costs components like taxes and workers comp insurance.

Well. Unemployment tax universally across the nation has gone up. That certainly contributes to a higher first quarter loss than may be normal. We were able to recoup some of that from our customers, not all but other than that relatively it's kind of a pass-through cost that really has not much effect on us. Our margins per employee, if you will our PEO customers remain fairly consistent. Ameda Zakari – Roth Capital: Okay. And then how many shares were bought back during the quarter?

Jim?

I have that number here. During the fourth quarter of '09, we bought back just a little over 60,000 shares. Ameda Zakari – Roth Capital: Okay. And how much is authorized left in the buy-back?

Yes. Current remaining authorizations, a little over 1.8 million. Ameda Zakari – Roth Capital: 1.8 million. OKAY. And have you guys thought about boosting that?

I don't think we need to boost it? We're having a hard time getting shares when we're in there trying to buy it any way. As soon as we get close to 1.8 million we'll let you know about the boost. Ameda Zakari – Roth Capital: Okay. Sounds good. Thanks, guys.

All right.

(Operator Instructions) At this time there are no further questions.

That's great. Well. Thanks for your interest and we actually look forward to a very good 2010. We've got a lot of momentum, a lot of things going on. I anticipate, given that we don't have some kind of W that we're going to have a good year. Thank you and we'll talk to you next quarter.

This does conclude today's conference call. You may now disconnect.